Bitcoin has become another popular instrument to follow. With the amount of amazing stories you have heard, you might be thinking of buying some Bitcoin.
The problem is Bitcoin is just like so many other stocks. It goes up and down and if you buy it near the top before it collapse then you are in for a big drawdown. In this article, we will use technical analysis to help you determine whether it is a good time to buy Bitcoin or not.
This would be an update of Bitcoin. Last week I did an analysis on it and mentioned about the long term picture of Bitcoin. So do read the past week's analysis below.
Bitcoin has indeed bottom from the looks of it. It has broken out of a triangle pattern and this is very promising. There is also support nearby which I have highlighted in green. As long as Bitcoin stays above this area, then it is likely to move higher.
The triangle tip can also be an area for you to watch. When Bitcoin breaks out of the triangle, a bullish move will rarely drop below the tip of the triangle. So as long as Bitcoin stays above the tip of the triangle, then it is likely to move higher.
I do want you to take note of the resistance on the left and also the 200 MA. As Bitcoin reaches to this area, it is likely to find some resistance. This resistance needs to be overcome either by a correction or a sideways trading.
But as I said, as long as Bitcoin stays above the green support area or the tip of the triangle, this bullish move up is still healthy and Bitcoin is likely to continue to move higher.
The 2 hour chart of Bitcoin shows that it is still in a 2 hour uptrend. But it is getting a bit overbought and as mentioned above, it is reaching a daily resistance. So I do expect some weakness in the short term as the resistance gets absorbed.
So far I do not see a drastic drop in Bitcoin yet and I have highlighted the support area above in green. As long as Bitcoin stays above this support area, eventually it will overcome the resistance and move higher.
The charts snapshot that I have taken are as of March 23 2022, so do take that into consideration as you may be reading about this from somewhere in the future.
Let me begin by showing you the weekly chart of Bitcoin. Bitcoin may be setting a base in which it can breakout of. The last time it broke out of a base, Bitcoin went up higher. Therefore, if Bitcoin breaks out of this base, then it may go higher by quite a lot just like last time.
Despite the recent sell off, Bitcoin did not drop below the last low. In fact it may be making a higher low. This can be a bullish sign for Bitcoin.
With that understanding from the weekly chart, I would like to show you the daily chart of Bitcoin now. The sell off from November to February was terrible and caused a lot of losses (and sleepless nights) for investors. This is a stage 4 downtrend but at this moment, Bitcoin may be entering a stage 1 basing in the daily chart.
You can read about the 4 different stages of the market in the first article in my course which you can find free on the homepage. This helps you to know when is a good time to be buying stocks and other things such as Bitcoin.
There are a number of positive signs for Bitcoin. First of all, Bitcoin broke above a downtrend line. This usually happens when Bitcoin wants to bottom. Secondly, Bitcoin has been making higher lows for the past few 2 months. Thirdly, Bitcoin has been able to go back above the 20 MA and 50 MA. Previously when it was selling off, it was below these 2 moving averages.
Another very important thing I would like to show you is Bitcoin may be forming a triangle pattern. This pattern can happen at a bottom. With triangles, if Bitcoin breaks out higher of the triangle, then it is likely that Bitcoin will go up. On the other hand, if it breaks below the triangle, then it may go lower. So watch which way it breaks out carefully.
Some traders may buy a breakout of the triangle and put a stop loss below. For investors, as long as Bitcoin stays above 33000, it can be a good time to accumulate it.
Using the 2 hour chart of Bitcoin, we can analyze where Bitcoin may be trading in the short term. Currently, Bitcoin is in a 2 hour uptrend and we should expect it to continue to be trading upwards.
The 2 hour uptrend line can be a guide. As long as Bitcoin stays above the uptrend line, then it is likely that Bitcoin will drift higher.
Hopefully this analysis helps you make a better decision on whether to buy some Bitcoin.
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